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Anatomy of a Crisis: 2011

There is a rising loss of faith in the conventional (i.e. propaganda) account of the U.S. economy. Readers tell me their local coin store has no silver coinage left, as the public has been buying with a vengeance. This is significant. (Silver has long been called "the poor man's gold.") In the conventional view, the "herd" always gets it wrong: the "retail" "small speculator" investing public buy stocks and real estate at the top just as the "smart money" is distributing/selling. This "dumb money" cycle is certainly evident in manias and bubbles. But there are also examples of "the public" acting well in advance (perhaps a form of "crowdsourcing") of the "experts." One of the most remarkable trends of the past decade is the steady rise of the classic hedges against inflation and financial disorder: precious metals. While the Federal government and a veritable army of conventional economists have repeatedly assured us over the past 10 years that the economy and the dollar are both sound, gold has quintupled from under $300 an ounce to over $1,500 an ounce. Given that official inflation measured 26% for the decade 2001 - 2011, then clearly the public isn't "buying" the "sound dollar, sound economy" story. They're also not buying the "you can't afford not to own stocks in the New Bull market" story: the public has sold some $350 billion of domestic mutual funds in the past two years. These are unmistakable signs that the public has lost faith in the Federal Reserve's account of the dollar, U.S. stocks and the economy. 2. The idea that quantitative easing is benign has lost credibility. Even the MSM is reporting the dismal real-world results of QE2, for example, Stimulus by Fed Is Disappointing (understatement of the year?).

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